Category Archives: Academic Papers

I don’t want to say too much about Nicky Kaldor’s actual stylised facts, but about the methodological implication of the stylised facts approach. Paul Samuelson famously said, “those who can do economics, do it; those who can’t, babble about methodology”. Kaldor could certainly do economics, but he needed a methodology to enable him to do what he wanted to do. This is my excuse for babbling.

Published in Money in the Great Recession: Did a Crash in Money Growth Cause the Global Slump? [Ed. Tim Congdon]

In recent years some monetary economists have voiced scepticism about aspects of the Keynesian revolution, particularly the importance of the 1936 General Theory relative to Keynes’ entire corpus.1 These sceptics have performed a valuable service by encouraging more whole-hearted Keynesians (including the author of this chapter) to look carefully at Keynes’ earlier work, notably the 1930 Treatise on Money. Arguably, the Treatise is in many ways a better guide than the General Theory to how Keynes would have thought about the Great Recession. The sceptics, notably David Laidler, have tried to position Keynes in the larger debates about monetary theory and policy in the inter-war period, so that the undoubted originality of some of Keynes’ thinking can be set in the proper context. In particular, when writing the Treatise in the late 1920 Keynes was aware of Knut Wicksell’s ideas about the “natural rate of interest”, and the possible macroeconomic significance of differences between it and the “market rate of interest”. But this strand of thought was side-tracked in the General Theory, where Keynes developed more rigorously his own liquidity-preference theory of the rate of interest.2

This paper argues that the thinking of John Maynard Keynes remains highly relevant to an understanding of the financial collapse of 2007–8 and for policy measures to enable the world to escape from the ‘great recession’. The essay explains the role of uncertainty in Keynes’s theory, and the Keynesian case for fiscal and monetary ‘stimulus’. It provides a Keynesian perspective on the reform of the world’s monetary system, and concludes with reflections on the role of the state and the state of economics.

Published in Rebalancing the Global Economy: A Primer for Policymaking by Stijn Claessens, Simon Evenett and Bernard Hoekman (eds)

This chapter argues that the Keynes Plan of 1941 for dealing with the trade imbalances of his time is highly relevant to the problem of East Asian-US imbalances today. Just as the first Bretton Woods system rested on a “grand bargain” between the US and Britain, a new Bretton Woods would test the statesmanship of the US and China.

Published in The Indian Journal of Industrial Relations, Vol. 45, No. 3, January 2010 pp. 321-335

John Maynard Keynes keeps returning, like the ageing diva who goes on giving farewell performances. What does this tell us? First, it tells us that in economics there are no final victories and defeats. Rather, economic doctrines ebb and flow, obedient to changes in consciousness and in the world. But, secondly, it tells us that as the world changes, so do its structures of power. The rise and fall of different schools of economics is related to shifts in the balance of social and economic power. Marx understood this, hence his place in my title.

‘In the long run’, Keynes famously wrote, ‘we are all dead’. For the last twenty-five years it has been widely assumed that this applied to Keynes’s own theories. Markets were, or could be made efficient, removing the need for government stabilization policy. All that was needed was ‘control of the money supply’. The theory of efficient markets underpinned the so-called ‘Washington Consensus’. In the last ten years, evidence has accumulated that financial markets are subject to severe volatility which, in the absence of government intervention, can spill over into the real economy. So the question sixty-plus years after Keynes’s death is: is there life left in the old boy?

Published in The Cambridge Companion to Hayek, edited by Edward Feser, (Cambridge University Press, 2006)

‘[Keynes] was one of the great liberals of our time. He saw clearly that in England and the United States during the nineteen-thirties, the road to serfdom lay, not down the path of too much government control, but down the path of too little, and too late. …He tried to devise the minimum government controls that would allow free enterprise to work. The end of laissez-faire was not necessarily the beginning of communism’. (AFW Plumptre, ‘Keynes in Cambridge’, Canadian Journal of Ecoinomics, vol. 13, August 1947)